Home-Price Appreciation Slowed During Third Quarter

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Home-Price Appreciation
Slowed During Third Quarter

By Dawn Kopecki
From The Wall Street Journal Online

U.S. home-price appreciation slowed somewhat during the third quarter, with the average cost of a single-family home rising by a still brisk 12% over the 12 months ended Sept. 30, new federal data released Thursday show.

The pace of home-price growth dipped from an average rate of 14% during the year ended June 30, according to the Office of Federal Housing Enterprise Oversight. Ofheo, which regulates mortgage finance companies Fannie Mae and Freddie Mac, attributed the drop to a slowdown of the heady rise in real estate prices in the Pacific and New England states.

"Appreciation rates in the third quarter were extremely strong, although some deceleration can be seen in a number of faster-appreciating markets," Ofheo Chief Economist Patrick Lawler said in a statement.

The growth rate of home prices in the Pacific states, which includes California, dropped for the 12 months ended Sept. 30 to 17.3% from 21.5% during the year ended June 30, Ofheo said. Annual price appreciation in New England fell to 9.4% as of Sept. 30 from 13% in the prior quarter. The 12-month rate of home price growth also fell in the Middle Atlantic states, which includes New York, from 14.8% in the second quarter to 12.4% in the third quarter.

Nevada's four-quarter appreciation rate plummeted by 11 percentage points from 28.6% in the second quarter to 17.6% in the third quarter. Ofheo noted that Nevada's booming cities, which had dominated the top 20 metropolitan statistical areas (MSAs) for price growth, are missing from the list this quarter for the first time in nearly two years. The real estate market in the Reno-Sparks metropolitan area, which ranked fourth last quarter, fell to 29 out of the 265 MSAs Ofheo tracks. The Las Vegas MSA plummeted from 21 during the second quarter to 77 in the third quarter with a 12-month appreciation rate of 13.8%.

Mr. Lawler attributed the drop off to rising interest rates during the third quarter.

The fast pace of home price growth also tempered somewhat in the South Atlantic states, which include the hot real estate markets in the Washington, D.C., metropolitan area and along the Florida coast. Price growth in that region slightly rose to 16.9% during the 12 months ended Sept. 30 from 16.7% during the same time frame ended June 30.

Ofheo compiles its home price data from repeat sales or appraisals on refinanced homes for properties whose mortgages have been financed by Fannie or Freddie, which are limited to the conforming loan market. The data don't reflect all real estate transactions and can be skewed by the fact that Fannie and Freddie do not purchase loans guaranteed by the Federal Housing Administration, which tend to go to lower-income borrowers, and cannot purchase loans above the conforming loan limit, which is currently at $359,650. That limit will be raised to $417,000 on Jan. 1.

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-- December 05, 2005